In Thick Of Action

PE players have become extremely active of late. The exuberance is here to stay for some time.

- B.S. SrinivaSalu reddy

AT A TIME WHEN FRESH INVESTMENTS are down to a trickle — new investment proposals in the 3rd quarter of 2017 were at the lowest levels since the September 2004 quarter — venture capital (VC) and private equity (PE) investors are going full throttle to make a point that India is a compelling investment case. In 2017, PE/VC investments touched $26.8 billion, a 37 percent increase from the previous record in 2015, according to EY’s PE Deal Tracker. On an year-on-year basis, the rise comes to 65 percent; annual PE investments have risen 3.5 times over the last five years, an impressive show by all means.

“The year 2017 was a watershed for India's PE/VC sector. Investments grew to a record high. Deals became larger and more complex. Growth capital deals accounted for the highest activity and investment,” says Vivek Soni, Partner and Leader for PE Advisory, EY. Four growth capital deals worth more than $1 billion each made headlines as start-ups launched during the final years of the last decade came of age and looked for money to fund their next stage of growth. Three involved Softbank —Flipkart ($2.5 billion), PayTM ($1.4 billion) and ANI Technologies or Ola Cabs ($1.1 billion, along with Tencent). Apart from this, there was a $1.39 billion investment in DLF Cyber City Developers Ltd. by GIC (a big chunk of the proceeds will be used to reduce the developer’s huge debt that is weighing on its financial performance).

Even exits rose as PE players took advantage of buoyant capital markets to book profit. The year saw exits worth $13 billion, nearly double the $6.67 billion seen in 2016.

PE funds have set an exciting pace for investments in India. But will it sustain? Broad trends such as dried-up bank lending, economic recovery, buoyant capital markets, fast growth in emerging sectors and the ongoing deleveraging by companies signal a bigger role for them in the coming years.